The regulator is considering whether to increase the number of free cases firms are entitled to at the Ombudsman and increase the importance of the case fee, rather than the levy, in its funding.
The Financial Services Authority (FSA) has published a feedback statement describing responses to its discussion paper last year on how the costs of funding the Financial Ombudsman Service (FOS) could be shared among firms in future.
It received 80 responses to the paper, the majority of which favoured options E to H of the discussion paper, whereby the case fee would be set each year at a rate broadly equivalent to the cost-per-case and the annual levy would be a flat-rate per permission or per firm.
Many respondents also supported the proposal to increase the number of free cases and the case fee funding a greater proportion of the FOS’s expenses.
The FSA says it will see what scope exists for moving in this direction when agreeing the FOS’s budget for 2008-09.
Following the strong consensus for most or all of the funding coming from case fees, the FSA increased the case fee from £360 to £400 from 1 April 2007.
But it says it will not implement any radical changes to the funding structure now because the FOS is expected to experience significant volatility in case numbers as a result of the greater than anticipated decline in the number of mortgage endowment cases.
In addition, although most respondents favoured the new model, some were concerned the existence of a considerably large number of free cases would penalise firms which did not have many cases with the FOS because it could essentially increase the levy on all firms to cover the cost.
However, because of the overall support for change within the industry, the FSA says it will consider whether changes can be made when agreeing the FOS budget in January.
It states: “The pace and extent of any such change (for example, gradually increasing the number of ‘free’ cases) will have to be assessed in light of the prevailing circumstances and FOS’s budget and/or workload forecasts each year.”
The Association of IFAs (AIFA) has been lobbying for option H of the discussion paper, which would see case fees becoming payable from the 11th and subsequent cases and an annual fee of around £230 per firm.
By contrast, the Association of Mortgage Intermediaries (AMI) favours option F, whereby case fees would become payable on the sixth and subsequent cases with an annual fee per firm of around £175.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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